Search form

You are here

"Don’t let your boring investments lead you to gambling by": John Sample ›

"Don’t let your boring investments lead you to gambling by": John Sample

Submitted by Baycity1 on Thu, 05/17/2018 - 7:40am

I have to apologize for being missing last week’s column - a fishing trip got in the way.
While the fishing was great, I missed talking about Warren Buffet’s interview last week.
As always, the Oracle of Omaha provided several subjects worth considering, such as revealing that during the first quarter Berkshire eliminated its investment in IBM while adding to the investment in Apple.
He also noted his regret in not investing in Alphabet and Amazon.
He continues to maintain that, for the small investor, an ETF for the Standard & Poor’s 500 stock-index is the most logical choice.
He said you could purchase and come back years later without the worry. I find this interesting since Buffet is a value investor.
This leads me to evaluating where we are at this time in the market.
After the sustained 16-month run that ended in January, the market has gone sideways. This has come with West Texas Crude prices climbing to over $70.
We had a first-quarter GDP of 2.3 percent with estimates of a possible jump to 3.7 percent.
Dividends from the tax legislation have climbed by double digits. The last earnings season was generally better than projected.
You take all of that good economic news and counter it with geopolitics and we can’t seem to get out of our own way.
Some suggest that it is the price you pay coming from a low volatility environment that spawned gains of over 20 percent.
The good news, Buffet noted, is that the overall multiple has at least dropped back to a more realistic level.
Should earnings keep going up, it’s obvious that stocks would follow.
The most important fact from Buffet’s thoughts is that a more reasonable return of 7 percent for equities is more likely this year.
After last year’s gains, many investors will not be satisfied.
That is the crux of the problem. The equities market is not equivalent to gambling.
Just in time, the Supreme Court struck down legislation banning sports book making to only a few selective states.
As if the lottery was not enough, you soon will have legal sport betting available.
While I don’t think this is a substitute for investing, it will be a significant economic impact and not all bad.
It was also interesting to hear the Vice Chair of Berkshire, Charlie Unger, speak on his investment insights.
He has significant personal investments in China and suggests that ETFs focusing on that country and the Pacific Rim could be a vehicle for diversity for small investors.
Along with Bill Gates, a board member, all three had the opinion that crypto currency is little more than gold, providing no productive value.
The technology behind the currency is significant, but the currency itself is subject to the next bidder’s whims.
I suggest that until the 10-year bond yield moves much closer to 4 percent, this market will continue to provide a positive return.
Buffet noted for him and value investors, the problem is that most stocks are fully priced.
I stick by my belief that we will end the year higher than where we began, but the gain will be substantially lower than last year. Patience my friends.